Navigating the risks of rate rises

2023 has been an historic year for the Reserve Bank of Australia’s (RBA) in raising the cash rate to an 11-year high in an effort to battle inflation.

The cash rate was only 0.1 per cent in early May last year, and it has been lifted rapidly since then — 12 times across 16 months — in the steepest increase in the RBA’s history, to where it’s now sitting at 4.1 per cent.

As the RBA continues to try and curb consumer spending, there are a number of risks that borrowers could face after this series of cash rate rises.

Read on to find out what these are and what you can do to mitigate the risk.

Getting trapped in a ‘mortgage prison’

‘Mortgage prison’ is when you lack the equity or can’t meet the serviceability requirements to refinance your home loan.

Basically, you become stuck in your current mortgage, even if it’s no longer suitable for you.

You can find yourself in mortgage prison if the value of your property has fallen and interest rates have risen.

Venturing into negative equity

A rising cash rate can cause downward pressure on property prices, which can leave some properties in negative equity territory.

Negative equity is when the market value of your property falls below your outstanding home loan balance. That’s right – you owe the bank more than what your property is worth.

Say your property is worth $800,000 and you owe the bank $720,000. If your property’s value dips to $700,000, you’ve landed in negative equity.

Homeowners who took out large loans at low-interest rates with minimal deposits may be at greater risk of venturing into negative equity, particularly if their interest rates have increased and their property’s value has fallen.

Navigating fixed-rate loans

During the COVID-19 pandemic, fixed-rate borrowing increased significantly as borrowers made the most of low-interest rates. Mortgage holders fixed for longer periods, and banks offered fixed rates below variable rates.

Now, many of those fixed terms are expiring. According to the RBA, in 2023, 880,000 fixed rates will expire, while in 2024, 450,000 loans will reach the end of their fixed term.

These borrowers are facing substantially higher interest rates. This begs the question – do you fix at a higher rate or let the loan revert to variable?

Economists are largely split as to whether the cash rate will remain where it is or whether we could see a cut in the next 12 months – which may not be the best news for those who have already re-fixed their home loans.

How to mitigate the risk of a changing cash rate

Build up your equity

There are a few options to explore here:

  • Increase your repayments: If the budget allows for it, increasing your repayment even slightly could help you build up your equity faster.
  • Make repayments more frequently: Paying weekly or fortnightly could help you pay off more of your mortgage each year and build equity.
  • Make extra repayments: Build your equity by throwing a lump sum on the home loan or making a regular extra repayment to get ahead.
  • Renovate: Give your property a facelift and help boost its value, and in turn, your equity.

Consider refinancing

By refinancing, you could secure a more competitive interest rate or a home loan with interest-saving features that may help you pay off the mortgage sooner.

If you’re in a mortgage prison or negative equity territory, it may be difficult to refinance. However, it’s important to speak to us so that we can explore your options and make a plan.

Need help?

The sooner you reach out, the broader the range of choices you’ll have. So get in touch and we’ll take a look at your specific circumstances.

Negotiating a spring bargain

Spring typically sees an uptick in property sales and this trend looks set to continue in 2023.

In the first week of spring, more than 2,400 properties were scheduled to go under the hammer – up 13 per cent compared to the first week of spring in 2022.

Coupled with property prices rising in recent months, it’s important to understand how to negotiate like a pro if you’re on the hunt for a bargain this spring. Read on for our top tips.

Tip 1: Comprehensive research

A deep understanding of the local property market can be a significant advantage. You’ll be in a better position to make an offer or bid with confidence. We provide a range of detailed reports that can offer insights. Whether you’re keen on specific suburb data or an estimated valuation of a particular property, we’re here to assist.

Hint: CoreLogic’s weekly Auction Market Previews are a valuable tool. They provide timely updates, ensuring you’re always informed about market shifts.

Tip 2: Secure your finances

When the right property comes along, being financially prepared can make all the difference. Discuss pre-approval with us now. Having pre-approval gives you confidence during price negotiations with vendors. It may also give you an edge over other buyers without pre-approved finance.

Tip 3: Understand the seller’s motivation

Gaining insights into the seller’s reasons for listing can give you an upper hand during negotiations. What settlement terms and deposits will be most attractive to them?

Are they relocating for work? Might they be open to adjusting the price for a more streamlined settlement process? Sometimes, offering a slightly larger deposit can make your proposal more appealing. Engage with the real estate agent to gather such insights.

Tip 4: Prioritise inspections

Never underestimate the value of thorough building and pest inspections. They can reveal potential issues with the property, which can be crucial during price discussions. If there are significant concerns, you may be able to use the findings from the inspection to negotiate a lower sale price.

Let’s Talk

If you’re in the market for a property purchase, reach out to us to organise your finance pre-approval and set yourself up for a bargain this spring.

7 tips to pay off your home loan sooner

Managing a mortgage can be challenging, especially when faced with growing expenses. However, with a clear plan, you can make significant progress towards paying off your home loan sooner. Read on for our 7 practical tips to help boost your savings.

1. Implement and monitor a budget:

Use budgeting tools like Mint, YNAB, or PocketGuard to make it easy to categorise your spending and quickly review your finances. Regular checks can help ensure you’re adhering to your budget and savings goals.

2. Develop a sustainable plan to cut costs:

Rather than making extreme changes to your lifestyle and spending habits, focus on manageable adjustments to your spending. Consider cancelling those streaming subscriptions you’re not using, learn how to cook your favourite meals at home, or opt for a second-hand or DIY option rather than buying brand new.

3. Use automatic transfers:

Set up automatic transfers for your savings and additional mortgage repayments. This ensures you move your money to where it needs to go before you have a lapse in willpower and spend it. An offset account could also help you to reduce the cost of borrowing by more than you would earn in interest by leaving your savings in the bank. But it could also end up costing you more and limit your access to cash when you need it.

4. Review your loan every couple of years:

How long has it been since you looked at the terms of your mortgage? If your circumstances have changed and you suspect you may struggle to make future repayments, we can assist with a comprehensive loan review. We may be able to secure you a payment structure that makes your repayments more manageable and frees up cash flow.

5. Consider additional income sources:

Realistically, there is only so much you can save. Another way to boost your savings and make extra repayments is to establish an additional income stream. Think about starting a side job, renting out assets, or selling some of the unused items sitting around the house.

6. Opt for lump sum payments:

If you receive a tax return or bonus, think about making an additional mortgage payment. The long-term benefits of additional payments could reduce the life of the loan significantly.

On a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years go towards paying off interest. So anything extra you put in during that time will reduce the amount of interest you pay and shorten the life of your loan.

Make sure to ask your lender if there’s a fee for making extra repayments.

7. Change your payment frequency:

Switching your mortgage repayments from monthly to weekly can offer benefits in the long run. Since interest accumulates daily, this adjustment might lead to savings on your overall home loan.

Need assistance with paying off your home loans sooner?

If you’re looking to kickstart your savings plan and boost your mortgage repayments, reach out to us. We’re here to provide guidance and support.

Smart Investing for the Budget-Savvy

Is a small budget holding you back from property investment? Think again!

You might be surprised to learn that you don’t need a hefty bank balance to dive into the property market. Let’s explore how you could make this dream a reality.

1. Unlock Your Home’s Potential Through Equity

What’s Equity? It’s the difference between your property’s market value and what you owe the bank. For instance, if your home is worth $800,000 and you owe $500,000, you have $300,000 in equity.

How Can It Help? If the value of your home has appreciated or you’ve made significant progress on your mortgage payments, you could be sitting on a hidden treasure. By refinancing, you can tap into this equity, providing you with the means to invest without depleting your savings.

2. Think Beyond the City

Why Regional? If city investments are stretching your budget, consider looking into regional areas. Many of these zones have recently surpassed major cities in performance, especially when it comes to vacancies, rental rates, and property values.

Hotspots to Consider in 2023: Refer to the latest “Top 10 Affordable Regional Areas 2023” report for inspiration. This comprehensive study, based on affordability, property trends, investment considerations, project development, and unemployment rates, highlighted the following standout areas:

  • Queensland: The Whitsunday Region, Mackay Regional Council, The Charters Towers Region.
  • New South Wales: Federation Council, Dubbo Regional Council, The City of Lithgow.
  • Victoria: City of Greater Bendigo, City of Greater Shepparton, City of Ballarat.

 

  • Tasmania: Central Coast Council.

3. Two Heads Are Better Than One

Joint Ventures: Consider teaming up with someone. It could be a friend, family member, or another investor. Pooling resources can make property investment more accessible.

Remember: This is a big decision. Always get legal advice to ensure everyone’s on the same page.

4. The Off-the-Plan Route

How It Works: You sign a contract, pay a deposit (often just 10%), and settle the balance once the property’s built. This gives you time to get your finances in order.

Pros: Lock in today’s price, even if property values soar during construction.

Cons: There are risks, like potential drops in property value. Always research thoroughly.

Ready to Dive In?

Exploring finance options is a crucial step. Reach out to us! We’re here to guide you through the maze and help you align with your investment objectives.

Preparing for a spring property purchase

Spring has almost sprung and in the property world, it’s an exciting time of year.

So, what will this year’s spring selling season look like?

Property prices are still on the rise in many markets, despite the Reserve Bank of Australia’s aggressive interest rate hikes since May 2022. Property prices rose 0.7 per cent in July – the fifth straight month of gains.

Listings are also on the rise but remain below 2022 levels. If you’re a prospective buyer, you’ll need to be ready to pounce when you find a bargain this spring. Here are our tips for being ready.

Tip 1: Do your research

The property market is constantly changing. If you’re looking to buy, you’ll want to make sure you have the latest information at your fingertips so that you’re confident when making an offer.

We can provide a range of reports to help you cover your bases. Get suburb reports with all the info you need to narrow down your property search. Access property reports with valuation ranges, recent sales data and more.

Tip 2: Get your finances in order

If you do find a bargain, you’ll want to be ready to jump on it. Speak to us about organising pre-approval on your finance sooner rather than later.

Pre-approval means a bank has agreed, in principle, to lend you a certain amount of money.

Having pre-approval gives you confidence during price negotiations with vendors. It may also give you an edge over other buyers without pre-approved finance.

Tip 3: Find out why the vendor is selling

Understanding the vendor’s motivation to sell may give you an upper hand during negotiations.

What type of settlement terms and deposit will be most attractive to them?

They may be moving interstate, or need liquidity fast, in which case they may drop their price for a shorter settlement.

Maybe they need an extra-long settlement while they find somewhere else to live.

Or perhaps a larger deposit would make you more favourable compared to other buyers?

Ask the real estate agent why the vendor is selling and use the information as a negotiation tool.

Tip 4: Rally your team

If you’re planning a spring property purchase, start thinking about which professionals you want on your team.

You’ll need a reputable conveyancer or solicitor to take care of the legalities for you.

Depending on the area you are looking to buy into, you may benefit from a Sydney Buyers Agent who can help you with the negotiations

In addition, you’ll want to line up building and pest inspectors to make sure the property is free of unwanted surprises like termites and structural defects. If they do discover anything untoward, remember you can use this as ammo during price negotiations.

As your finance broker, we’ll compare the market and suggest a competitive home loan that meets your specific financial situation and goals.

Get in touch

Property prices are on the rise in many markets, but there are plenty of opportunities out there for savvy buyers.

Get in touch today to organise pre-approval on your finance and be ready to buy your first home, next home or an investment property this spring.

How much does it cost to refinance?

With so much movement on interest rates lately and roughly half of all fixed-rate loans expiring this year, refinancing is on many people’s radars.

It’s no wonder. Some of those facing their fixed rate expiry are bracing for a 63 per cent increase in their monthly mortgage repayments.

If you fall into this category, you may be wondering how much it costs to refinance. Let us break down a few of the typical costs for you.

Costs to consider when refinancing

1. Mortgage application fee

If you’re switching lenders, you will likely have to pay a mortgage application or establishment fee. This covers the cost to your new lender of processing your application.

This upfront cost usually ranges from $200 to $1000, depending on the lender and the type of loan. It may or may not include a valuation fee.

2. Loan discharge fee

Saying farewell to your current lender will likely result in a discharge fee for the administrative costs associated with terminating your mortgage.

Often loan discharge fees are around $200-$400. However, they can be up to $1000.

3. Property valuation fee

Your new lender may require a valuation to be done when assessing your refinancing application. The cost largely depends on the lender and the location of the property – expect to pay more for rural properties.

Valuation fees may range from $200 to $600 in cities and $600 to $1000 in rural areas. Some lenders offer free property valuations.

4. Break fees

If you are on a fixed-rate loan, you may have to pay break fees to get out of it early. Break costs can be expensive and complicated to calculate.

The easiest way to understand your break costs is to ask your current lender for a rundown.

5. Settlement fee

Remember paying a settlement fee when you originally took out your loan? You’ll be up for that again if you decide to refinance.

Settlement fees are paid to the new lender to settle the loan and typically range from $100 to $400.

6. Mortgage registration fees

The land registry in your state or territory will charge a mortgage registration fee to register your mortgage on the title record for the property.

The cost could be anywhere from $120 to $210.

7. Exit fees

The Federal Government got rid of exit fees from 1 July, 2011—but this is only for contracts signed after this date. If you signed before then, you may pay exit fees for ending your loan early. Check with your lender if you’re unsure.

How much refinancing can save you.

While all of the costs mentioned above may seem overwhelming, it’s important to consider the long-term benefits of refinancing.

How much you could save by refinancing depends on the size of your mortgage, how many years you have left on the loan, how much lower the new interest rate is and whether it has interest-saving features.

Like to discuss your options?

As your finance broker, we can help you decide whether refinancing is the right move for you in the current economic climate. We can help you weigh up the costs versus the benefits of refinancing and explain whether a different loan could better suit your financial situation and goals. Get in touch today.

Three steps to home loan pre-approval

Spring is just around the corner which traditionally means the property market will start to warm up. If you are considering making that next property purchase, it is recommended to get a home loan pre-approval first. Not only does it save you time on your property search but also protects you from overspending at an auction.

How long does pre-approval take?

Turnaround times for pre-approvals vary for each lender from the time of application submission. Verify with your broker the expected timeframe for your preferred lender. Providing us with the correct documentation up-front will help achieve a speedy turnaround.

Follow these three easy steps to get your home loan pre-approval.

  1. Collect your documents
    1. Proof of identity
    2. Proof of income and savings
    3. Proof of living expenses and other expenditure
    4. Evidence of current assets and liabilities.
  2. Talk with us to find out
    1. How much can you borrow
    2. How much you require for a deposit
    3. How much you can repay each month
    4. If you qualify for a government grant or concession.
  3. Submit pre-approval application with a lender
    1. We fill out the forms and do all the work
    2. The lender provides confirmation in writing
    3. Pre-approval lasts for 3 months and can be extended again.

f you’re ready to start your hunt for a new home or investment property, get in touch with us to organise pre-approval early so you are ready to act fast when you find the right property. Learn more about the benefits of pre-approval.

Why it’s a good idea to get pre-approval

You may have heard it’s important to get a home loan pre-approval. But why do you need it?

Pre-approval confirms you’re eligible to apply for a home loan up to a certain amount. Essentially, the lender checks your financial circumstances to decide if you’ll meet their criteria and can afford to repay a mortgage. It is also a recommended first step to your property search because of the numerous benefits it can give you.

Benefits of a home loan pre-approval

  1. Confirm your borrowing power  Before you start searching for a property, it’s important to confirm your borrowing capacity. Online calculators can give you a general indication of what you might be able to borrow given your income and savings. But they don’t confirm what size repayment you’ll be able to make after you meet your other living expenses and financial commitments.With a loan pre-approval, you’ll know exactly how much you can afford to pay for a property. It gives you a solid understanding of your finances and a clear spending limit. Getting pre-approved through a reliable broker (like me) can also help identify possible issues that you may not be aware of, as well as spot something that may have been overlooked
  2. Save time on the property search   Imagine spending a lot of time looking for your dream home, only to be rejected because you can’t secure finance. Getting a pre-approval will confirm how much you can borrow and help you save time, avoid wasted effort looking at properties you can’t afford, and prevent disappointment.
  3. It gives you a competitive advantage  In a competitive property market, it’s important to move fast. Sought-after properties sell fast and having a pre-approval allows you to make an offer as soon as possible. Pre-approval gives you the ability to make an offer on a property on the spot, with the confidence of knowing you’ll be able to get the finance organised quickly. It also signifies to vendors that you are the real deal. If you are bidding at an auction, a pre-approval also helps you negotiate from a position of strength.
  4. It protects your deposit  Before you hand over your deposit money, it pays to make sure you can get the home loan you need to complete the purchase. If there is some issue with your eligibility or a lender won’t approve the amount you need, you could potentially lose your hard-earned deposit.Pre-approval gives you an important financial safeguard. And if you’re buying at an auction, pre-approval is particularly important because your deposit is non-refundable. Once the hammer goes down and you’ve made the highest bid, you’ll be locked into the purchase. For that reason, we recommend you make sure your finance approval is rock solid first.
  5. The property must also get evaluated  Once you find the right property, you’ll still need to make a formal loan application to the lender. As part of this process, the lender will require a valuation of the property you select. Aside from confirming a budget for a home loan, it is also important to confirm if the loan will be approved by the lender for the property you chose. This is an important step as there are some properties that may not be acceptable to some lenders for the following reasons: if it is remotely located, its value is not enough to back the amount of the loan, or the location is ”risky”, among other concerns.

Apply for a loan pre-approval today

If you’re ready to start your search for a new home or investment property, get in touch with us today so we can arrange your pre-approval. We will help you understand the process, which will allow you to shop around for your dream property with confidence.

Refinancing made simple

Are you considering refinancing? You’re not alone.

According to the Australian Bureau of Statistics, the value of external refinancing in May 2023 in seasonally adjusted terms rose 8.1% to $21.0b and was 22.4% higher compared to a year ago.

Indeed, the series of cash rate hikes by the Reserve Bank of Australia (RBA) has left many homeowners reviewing their home loans, interest rates and loan features.

But with hundreds of different products on the market, deciding which home loan is right for you can be overwhelming. That’s where we can help.

As mortgage brokers, we can play a crucial role in providing you with choices tailored to your needs.

Here’s how we can help you.

1. We know the market

The mortgage industry has changed significantly. Interest rates have gone up. Banks have tightened their lending standards. It’s a whole new world for borrowers.

Never before has it been so crucial to have a professional broker on your side. Someone who is knowledgeable about the industry and understands which products suit your specific financial situation and goals.

2. Tailored finance solutions

There’s no one-size-fits-all mortgage. Everyone’s financial situation and goals are different, which is why you need tailored finance solutions.

We will go through your unique financial requirements and search for a loan that’s appropriate for your specific needs.

3. A broad range of choices

We compare a wide range of lenders and products to find the right one for you. We might also be aware of home loan offers or lenders that are not mainstream or well-known, opening up other opportunities.

We also do all the legwork for you, which saves you time doing your own research.

4. No or low cost

Lenders pay mortgage brokers for their business, so there’s usually no cost to you.

What’s more, the commissions we receive are similar across lenders. This ensures there’s no incentive for us to recommend one lender over another. Our job is to act with our clients’ best interests at heart.

5. Make your life easier

If you’re already feeling financially stressed in today’s climate, refinancing might seem all too hard right now. But it’s worth the effort, particularly if it means you can better cope with your mortgage repayments and the rising cost of living.

We take the burden out of refinancing. We’ll run through your financial situation and requirements, and then explain your options.

If we do find you a more appropriate home loan, we’ll liaise with the lender and facilitate the refinancing process.

Common reasons to refinance

Here are some of the common reasons people choose to refinance:

  • To secure a more competitive interest rate
  • To make the most of interest-saving features like offset accounts or redraw facilities
  • To access equity for renovations, additional properties or other financial goals
  • To consolidate debt.

If you’ve been avoiding looking at your home loan since interest rates started going up, it’s time to take control.

Speak to us and we’ll see if we can find you a better home loan that suits your specific needs.

Achieve your investment goals: Loans for your strategy

Whether you’re a seasoned property investor or a newbie, it’s important to get the right team of professionals supporting you throughout your investment journey. Here’s how we can help.

Get the right loan for your investment strategy

There are loads of different investment loans available, so how do you know which is right for you?

We’ll take the time to understand your investment strategy and goals, then find a loan that aligns with your objectives. That might mean working with your financial planner or accountant to ensure everyone is on the same page.

Gain access to exclusive products

We have access to loan products that aren’t advertised by lenders. They may have more competitive interest rates or features that can save you money in interest.

Tap into expert knowledge

We can also boost your property investment success as we keep abreast of the ever-changing and complicated range of finance options available to property investors.

Whether you’re looking to borrow through a trust structure, within a self-managed super fund, or something more mainstream, we understand the criteria lenders will be assessing you on and can maximise your chance of a successful loan application.

Build your portfolio

If your property investment strategy is a long-term journey and you plan to acquire several properties, we can guide you about the type of finance you need to build your portfolio.

Whatever your long-term portfolio goals, we will work with you to find the right finance for your needs and create a finance strategy to expand your property portfolio.

Save time and money

Shopping around for the right investment loan can be time-consuming and tedious. Different lenders have different risk appetites and lending policies, and it can all become a bit of a mind field quickly.

By doing the hard work for you, we can save you time and money – and a few grey hairs. We will compare different investment loan options and find the right product that meets your investment goals.

Ready to chat?

Whether you’re rentvesting, buying and flipping, buying and holding, subdividing or buying off the plan, we can help line you up with the finance you need to make your investment goals a reality.

To find out more, get in touch today. We’re here to help.